Sound Housing Market Measures Required

This article from the Wall Street Journal “Finding a Post Crash Economic Model”,
outlines the important current discussions underway within
the international community of economists, with respect to
the problems with economic modeling.

Following the
triggering of the Global Financial Crisis in California in
2007, it became clear that there are major problems in the
field of economics with “economic modeling” –
something I wrote about back in January 2009 with “Housing Bubbles And Market Sense”.

I
agree with Professor Frydman of New York University, in that
it is impossible to model economic activity and behavior
accurately (the fatal mistake of central planners too) –
and that imperfect knowledge is the reality.

The WSJ
article states –

“In Mr Frydman’s view, the best
that policy makers can do is try to limit extreme swings. A
central bank might, for example, set indicative parameters
for the price of assets, such as stocks, bonds and houses.
If prices exceed these parameters, potential buyers will be
forewarned that they are taking on added risk of a big loss
– and might even think twice about doing so.”

For
example – focus on simple and clearly understood measures
of housing affordability.

Texas clearly leads the way, with its
open land market policies, appropriate infrastructure
financing arrangements (the Municipal Utility District bond
financing model) and its sensible Mortgage Consumer
Protection laws (refer “The Lone Star Secret | The Big
Money”). In Texas, sound Loan to Value Ratios
(LVR’s) are required and people are encouraged not to use
their homes as ATM’s.

On the front page of the writers
website “Performance Urban Planning”, a clear
and easily understood definition of an affordable housing
market is provided. This should be incorporated within all
local government planning documents. Back in early 2007 the
New Zealand Planning Institute
recognized this.

The New Zealand Labour Coalition
Government at the time and the current National Coalition
Government, have failed to take the necessary steps to
inculcate performance thinking in to the Local Government
culture, as suggested by the writer in early 2008 within a
paper Getting performance Urban Planning in
Place.

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